Invisible cover

2012-06-30 11:49

Did you know that you may already have insurance cover that you were not aware of?

This cover may include funeral benefits included in your bank fees, retrenchment cover on your personal loan, or life cover from your employer.

Many people may not claim from a retrenchment or disability cover that they have been contributing to for years, either because they are not aware of it or they do not know how to go about claiming.

If you belong to a group company scheme, such as a provident or retirement fund, your benefits might include cover for death, disability or retrenchment.

Hugh Hacking, the head of retirement fund solutions at Old Mutual, agrees that clients often do not claim because they are unaware of their benefits.

They sometimes even forget about the retirement savings they are entitled to.

“We are currently sitting with thousands of unclaimed benefits,” says Hacking.

He says the fund relies on obtaining clients’ details from employers, but if the fund doesn’t have the client’s details and he or she changes jobs, it becomes difficult to track down the client to pay out the claim.

Employer insurance

Many employers offer benefits to their staff such as a retirement fund, and most offer risk cover that will pay a benefit should an employee die or become disabled.

If you contribute towards your company retirement or provident fund, you pay a percentage of your salary towards your retirement fund.

This is known as accumulated credit. Your accumulated credit is saved for retirement, and your monthly contribution is usually about 10% to 11% of your salary.

If you resign or are dismissed, you are still entitled to receive your savings portion.

The other portion (about 2% to 3% of salary) goes towards your risk cover, which includes death and disability or retrenchment cover.

If you get retrenched or become disabled, your cover will be paid out as either a lump sum or in monthly instalments, depending on the rules of the fund to which you belong.

If you are permanently disabled and declared unable to return to work, you may even receive a monthly benefit until a certain age, such as your retirement date, in which case your retirement benefit will be paid to you as set out by the rules of your fund.

It is important to note that disability includes anything that prevents you from performing your normal duties.

Credit insurance
FNB Life chief executive Dushen Naidoo says that customers who have insurance on their unsecured loans do not always claim their benefits.

“Customers might be ignorant of the benefits they have or forget about it when they are retrenched, causing them not to claim,” says Naidoo.

He advises that when customers take out an unsecured loan and credit is offered – which is often branded as “insurance” – customers should make sure they know what is covered, what is excluded and how to go about claiming.

“You should insist on having the information in writing from either the credit provider or the insurance company. Keep the documents in a safe place to enable you refer to it if need be,” says Naidoo.

If you are retrenched, you need to notify the credit provider as soon as possible.

Even if you think you do not have retrenchment cover, ask the credit provider about it.

Your agreement with the provider might include retrenchment benefits for which you might not pay a premium.

Capitec Bank is an example of such a provider, as it automatically includes life and retrenchment cover on all credit products longer than six months.

Retrenchment normally covers your monthly instalments for up to six months while you are unemployed after being retrenched.

Johan van Schalkwyk, the head of the personal lines department at Santam, says that short-term insurance companies highly recommend that customers take “credit shortfall” for higher purchases such as vehicles.

Credit shortfall covers the remaining balance that you would owe the bank on your car loan.

This means that you will have a comprehensive cover equivalent to the market value of the vehicle with the insurance company and a credit shortfall that will cover you in the event of your car being involved in an accident or should you die.

In such an event, you would not owe the bank anything as credit shortfall would have settled the remaining balance with the bank.

Premium waivers
Some investment policies may also carry premium waivers should you be retrenched.

For example, if you contribute to a retirement annuity, endowment policy or even an education plan, if you are retrenched the policy may have a waiver in place that allows you to skip up to six months’ contribution without penalties.

Some short-term insurance policies on car and household insurance may also include a waiver that keeps your cover in place for a few months while you find a new job.

Therefore, it is important to notify your investment provider and insurance provider if you are retrenched rather than just skipping the premium.

Free funeral cover
There are several bank accounts that include free funeral cover as part of their “value-added” service, so it is worthwhile checking.

If you are a Smart Account holder on the unlimited pricing option from FNB, you are entitled to R10 000 worth of funeral cover at no cost to you.

If you are an FNB cheque account holder you have R1 000 free cover.

Nedbank’s Ke Yona account entitles holders to R2 000 worth of funeral cover, while Absa offers R2 000 free funeral cover on its transactional savings Flexi account.

All these automatically come into effect with the account.

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